Commentary and analysis on markets, personal finance, and wealth building from a contrarian perspective. "I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting there and trying to dream it up all yourself. Nobody’s that smart."
— Charlie Munger

Pages

Tuesday, February 16, 2016

Canacol hits 158 feet of net gas pay in Colombia

The Oboe 1 well encountered 158 feet of net gas pay with
average porosity of 23% within multiple stacked sandstone reservoirs in the
primary Tertiary-aged Cienaga de Oro target, representing the thickest gas pay
encountered in the Cienaga de Oro in the Clarinete discovery thus far. The
Corporation is currently casing the well and mobilizing testing equipment to
the location to commence production testing of various gas bearing sandstone
intervals within the Cienaga de Oro.

The expansion of gas pipeline and processing facilities continues apace and has led to monthly increases in gas delivered over the last few months. This is the thesis of my investment in Canacol; that being increased sales of gas leading to increases in cashflow that can recycled back into expanding the company's position in Colombia.

Realized contractual gas sales for the months of November
2015, December 2015 and January 2016 were 18.4 MMscfpd, 25.5 MMscfpd and 30.0
MMscfpd respectively, reflecting the additional sales related to the Promigas
pipeline expansion. Realized gas sales netbacks for the months of December 2015
and January 2016 were US$ 25.61 / barrel of oil equivalent (ǲboeǳ) and US$
26.83/boe respectively. Based on the latest Promigas pipeline expansion
schedule, Canacol estimates that gas sales will average approximately 80
MMscfpd (14,035 boepd) for calendar 2016 (including approximately 90 MMscfpd
for the last three quarters of calendar 2016) at an anticipated average
realized price of US$ 5.60 / thousand standard cubic feet (ǲmscfǳ) (US$ 31.92/
boe), with an average netback of approximately US$ 4.56/mcf (US$ 26.00/boe),
generating approximately US$ 163 million of gross revenues.